Duelling regulators: OSC takes aim at BCSC’s deregulation project

(July 9, 2003) The Ontario Securities Commission (OSC) has firmly rejected the British Columbia Securities Commission’s (BCSC) proposal to simplify securities regulation by shifting the focus away from rules toward a more principles-based regime. In a letter to BCSC chair Doug Hyndman, OSC chair David Brown calls the B.C. approach “extreme,” adding it would further fragment securities regulation in Canada.

Brown says he applauds the BCSC’s “immense” effort in quickly developing a concept paper and draft legislation and that he shares the objective of streamlining securities regulation. However, he says the BCSC “may have gone too far in removing prescriptive requirements and relaxing requirements on market participants.”

“The problem is that principles alone are rarely sufficient,” Brown claimed. “They do not provide sufficient clarity for market participants or for regulators unless they are supplemented with rules.”

A principles-based approach results in decision making by the courts and administrative tribunals, he added, “thereby adding to the complexity and costs for market participants.”

“We are concerned that [the BCSC’s] proposals increase the regulatory burden and costs for market participants, raise significant investor protection concerns and are not compatible with the direction of the [Canadian Securities Administrators (CSA)] and other major international jurisdictions,” Brown stated.

“We believe that a combination of principles and clear prescriptive requirements reduces the regulatory burden,” he said.

The BCSC has chosen to pursue a policy that would undermine the progress the CSA has achieved to harmonize regulation through the uniform securities legislation (USL) project, Brown pointed out.

“The BCSC proposals are not consistent with the direction of the USL,” he said. “[Its] criticism of the USL as a missed opportunity for regulatory reform undermines the importance of the project.”

Filed by Doug Watt, Advisor.ca, dwatt@advisor.ca